A parsimonious model for intraday European option pricing

A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general formula for the martingale price of a European call option. A complete derivation of this result is presented by means of elementary probabilistic tools.

MoreLess

Year of publication:	2012
Authors:	Scalas, Enrico ; Politi, Mauro
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Optionspreistheorie \| Wertpapierhandel \| Wirtschaftsmodell \| Markovscher Prozess \| Theorie \| Option pricing \| high-frequency finance \| high-frequency trading \| computer trading \| jump-diffusion models \| pure-jump models \| continuous time random walks \| semi-Markov processes

More details

Series:	Economics Discussion Papers ; 2012-14
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	685572315 [GVK] hdl:10419/55515 [Handle] RePEc:zbw:ifwedp:201214 [RePEc]
Classification:	G13 - Contingent Pricing; Futures Pricing
Source:	EconStor

Persistent link: https://www.econbiz.de/10010308122